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September 3, 2020

LB&I accepting new applicants for 2021 CAP program

The IRS's Large Business and International division (LB&I) is currently accepting new applications for its Compliance Assurance Process (CAP) program for tax year 2021. The application period runs through November 13, 2020; the IRS will notify accepted applicants in February 2021.

As explained later, updates for the 2021 CAP application period include modifications to the open-year criteria, updated requirements for the Tax Compliance Framework (TCF) Questionnaire and a time limit on the Bridge Phase.


CAP, a cooperative pre-filing program available to certain large taxpayers, began as a pilot program in 2005 and was made permanent in 2011. It is intended to allow the IRS and taxpayers to reach agreement on the treatment of various tax issues before a return is filed.

The CAP Program has three phases: (1) the CAP Phase (when the IRS and taxpayer resolve all or most tax positions before filing a tax return); (2) the Compliance Maintenance (CM) Phase (when the IRS, at its discretion, adjusts the level of review of the tax year based on the complexity and number of issues); and (3) the Bridge Phase (when the IRS will not accept any taxpayer disclosures, review any issues or provide any assurance).

In September 2019, the IRS solicited new applications for the first time since August 2016, when the IRS announced that it would no longer admit new taxpayers into the program (see Tax Alert 2019-1642).

Program eligibility

The general eligibility requirements for new applicants remain unchanged from last year's application. To be eligible for CAP, new applicants must: (1) have assets of $10 million or more; (2) be a US publicly-traded corporation that is legally required to submit SEC Forms 10-K, 10-Q and 8K; and (3) not be under investigation by, or in litigation with, the IRS or any other government agency that would limit the IRS's access to current tax records. Returning CAP participants that do not meet the second requirement may be grandfathered into the program if they commit to provide the IRS with financial statements prepared in accordance with US GAAP.

Changes for 2021

Changes for the 2021 CAP year for both new and returning participants include:

Open-year criteria

For the 2020 CAP year, taxpayers under examination could not have more than one filed return and one unfiled return open on the first day of the applicant's CAP year. In recognition of the effects of the COVID-19 pandemic on taxpayers, for the 2021 CAP year, the IRS will allow taxpayers in the CAP program to have two filed open returns.

Tax Compliance Framework (TCF) Questionnaire

For the 2020 application period, all applicants were required — for the first time — to file a TCF Questionnaire with information about the applicant's tax governance processes and system of internal controls. For the 2021 application period, only new CAP applicants must submit the TCF Questionnaire. Returning CAP participants will be required to submit an updated TCF Questionnaire only if there have been material changes, such as a major reorganization, being acquired or outsourcing any part of their tax function.

Bridge Phase

The Bridge Phase is reserved for taxpayers whose risk of noncompliance does not warrant the continual use of LB&I examination resources. For the 2021 CAP year, applicants can remain in the Bridge Phase for two consecutive years. After two years, the taxpayer will return to the CAP Phase or Compliance Maintenance Phase for the subsequent tax year.


Approximately 150 taxpayers are currently in the CAP program, including three participants that were newly admitted for the 2020 CAP year. The continued use of the TCF Questionnaire for new applicants underscores the IRS's focus on transparency and selecting relatively low-risk taxpayers for the program.

The relaxation of the "one open filed return" criteria for the 2021 CAP year brings welcome relief to taxpayers whose operations have been disrupted due to the pandemic, as well as those that may be making adjustments to filed returns as a result of the CARES Act.


Contact Information
For additional information concerning this Alert, please contact:
Tax Policy and Controversy
   • Bryon Christensen (
   • Heather Maloy (
   • Kirsten Wielobob (